TMI Blog2016 (4) TMI 1361X X X X Extracts X X X X X X X X Extracts X X X X ..... re not able to appreciate the view point of the TPO in allowing royalty payment in respect of goods sold to non-AEs and disallowing the same in respect of sales to AEs. Accepting royalty payment to AE in respect of sales to non-AEs goes to show that the ALP of royalty payment stood accepted by the Revenue. Nil ALP has been determined only of the royalty paid in respect of exports made to AEs. Royalty is payable on the basis of manufacturing of goods and not on the sales made. As the rate of royalty paid in respect of exports to AEs is equal to that in respect of sales to non-AEs, which has been accepted by the TPO at ALP, we fail to see as to how royalty paid in respect of exports to AEs is not at ALP - Tribunal has consistently deleted the addition in respect of royalty payment by considering the same to be at ALP, we are disinclined to accept the stand of the ld. DR for restoring the matter to the file of AO/TPO for a fresh determination of the ALP of this international transaction. This issue is decided in the assessee s favour. Grant of depreciation u/s 32 on Moulds used for plastic components - @ 15% OR 30% claimed by the assessee - HELD THAT:- AO reduced the depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other Honda Group entities operate or where the parent company has its own network. The assessee adopted Transactional Net Margin Method (TNMM) as the most appropriate method for benchmarking its international transactions, including payment of export commission. On a reference made by the Assessing Officer (AO) to the Transfer Pricing Officer (TPO) for determining the arm s length price, the TPO called upon the assessee to furnish certain details, which were filed by the assessee showing that it used the distributor network of its AE. Such distributors were those which already existed or to be designated by its AE. The assessee also furnished Agreement entered into with its AE in this regard, whose relevant parts have been reproduced in the TPO s order. By considering relevant clauses of this Agreement, the TPO opined that the assessee, by its export activities, was developing brand of the AE by positive action apart from expanding the reach of the AE/Group by introducing new products into the market. The TPO held that instead of availing any service for which such commission was paid, the assessee was, in fact, carrying out a service to its AE and, hence, there was no requiremen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot considered, the Hon'ble High Court remanded the matter to file of concerned AO for an ALP assessment by TPO, followed by AO's assessment order in accordance with law considering the deductibility or otherwise as per section 37(1) of the Act. 6. When we advert to the facts of the instant case, it turns out that the TPO proposed the transfer pricing adjustment equal to the stated value of transaction at ₹ 22.85 crore with Nil ALP of `Payment of export commission by holding that no benefit was received by the assessee as a result of the payment of commission and hence no payment on this account was warranted. The AO in his draft order has taken ALP of this international transaction at Nil on the basis of recommendation of the TPO without carrying out any independent investigation in terms of the deductibility or otherwise of such payment in terms of section 37(1) of the Act. This addition has been made by the AO in his final assessment order giving effect to the direction given by the DRP and not by invoking section 37(1) of the Act. As per the ratio decidendi in Cushman Wakefield India (P.) Ltd. (supra), the TPO was required to simply determine the ALP of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its AE. The TPO observed that royalty was paid to Honda, Japan and some exports were made to the subsidiaries or group companies of Honda, Japan only. Apart from that, the assessee was also found to have paid export commission to Honda, Japan @ 5% for exports made to its AEs. In view of these facts, the TPO opined that the assessee was a Contract manufacturer with regard to manufacturing of goods for its AEs inasmuch as such goods were manufactured in India by the assessee and, then, part of its was exported to various AEs. Considering the facts that no independent party would pay royalty under such circumstances in respect of exports made to AEs, the TPO determined ALP of the international transaction of exports made to its AE at Nil, which led to the eventual addition of ₹ 8.6 crore by the AO in his final order. The assessee is aggrieved against this addition. 10. We have heard the rival submissions and perused the relevant material on record. It is noticed that the assessee paid royalty in respect of domestic sales as well as export sales to AEs and non-AEs for a sum of ₹ 404.65 crore. The TPO simply considered royalty paid in respect of exports to its AEs f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r restoring the matter to the file of AO/TPO for a fresh determination of the ALP of this international transaction. This issue is decided in the assessee s favour. 12. Last ground of the appeal is against the grant of depreciation u/s 32 @ 15% on Moulds used for plastic components as against 30% claimed by the assessee. 13. Briefly stated, the facts of this ground are that the assessee claimed depreciation @ 30% and 50% on moulds used in plastic goods factories. The AO restricted such rate of depreciation to 15% by considering the view taken by him in earlier years. The assessee is aggrieved against the reduction in the amount of depreciation due to application of a lower rate. 14. After considering the rival submissions and perusing the relevant material on record, we find that the AO reduced the depreciation rate on plastic moulds by following the view taken by him in the preceding years. Neither the ld. AR nor the ld. DR could specifically point out the fate of such addition in the earlier years, inasmuch as whether the assessee accepted such addition or if assailed, then the final view taken by the Tribunal in the preceding years on this issue. Similar issue, when cam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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